Whitley's Elec. Service, Inc. v. Sherrod

• Decision Date: 11 November 1977
• Docket Number: No. 94,94
• Citation: 293 N.C. 498,238 S.E.2d 607
• Court: North Carolina Supreme Court
• Parties: WHITLEY'S ELECTRIC SERVICE, INC. v. Henry C. SHERROD.

Page 607

238 S.E.2d 607

293 N.C. 498

WHITLEY'S ELECTRIC SERVICE, INC. v. Henry C. SHERROD.

No. 94.

Supreme Court of North Carolina.

Nov. 11, 1977.

Farris, Thomas & Farris, P. A., by Robert A. Farris, Jr., and Thomas J. Farris, Wilson, for plaintiff.

Vernon F. Daughtridge Jr., Wilson, for defendant.

EXUM, Justice.

This is an action by an electrical subcontractor against a general construction contractor for money ($18,213.80) claimed to be due for "services rendered" between 6 April 1967 and 10 September 1971. The complaint was filed on 23 October 1973, and a copy of plaintiff's ledger account relating to work performed for defendant was attached to the complaint. Defendant answered denying the debt, pleading the three-year statute of limitations, ¹ and contending that there had never been a running account between the parties, that plaintiff had furnished labor and material pursuant to a number of separate and distinct contracts, and that more than three years had elapsed since a claim had accrued on any contract. It was undisputed that on 14 May 1971 defendant made a payment of $525.00 to plaintiff.

The most important question presented by plaintiff's appeal concerns the effect of this payment on defendant's statute of limitations defense. Judge Tillery, hearing the case without a jury, found that by this payment defendant "ratified and acknowledged his indebtedness to Plaintiff" and entered judgment for plaintiff in the sum of $17,450.83 with interest from 10 September 1971. The Court of Appeals, being of the opinion that the payment did not revive the entire indebtedness but only so much thereof as accrued within three years prior to the payment, reversed and remanded. Judge Vaughn dissented on the ground that defendant did not properly bring forward his exception to the trial court's crucial finding so as to raise on appeal the question whether there was evidence to support the finding. Defendant did not except specifically to this finding. There appears in the record after the judgment only this language:

"To the extension (sic) of the foregoing judgment, and to each and every finding of fact, and, conclusion of law therein, contained, defendant Henry C. Sherrod excepts.

DEFENDANT'S EXCEPTION NO. 113."

While we note that defendant's "broadside" exception fails to comply strictly with the requirement of Rule 10(b)(2) of the Rules of Appellate Procedure, appropriate disposition of this appeal requires that we nevertheless proceed to the merits of the case. See N.C.R.App. P. 2; City of King's Mountain v. Cline, 281 N.C. 269, 188 S.E.2d 284 (1972).

We hold that there is evidence in this record to support Judge Tillery's finding that the payment was an acknowledgment by defendant of that portion of his account balance which was awarded in the judgment. We consequently reverse the decision of the Court of Appeals remanding the case and order that the judgment of the trial court be reinstated.

Plaintiff offered evidence which tended to show the following: From 1958 to 1971 plaintiff furnished goods and services to defendant in the course of electrical, heating and airconditioning work on various building and remodeling jobs, and in certain other personal transactions. In October, 1967, defendant owed approximately $14,000.00 and agreed to borrow this amount for payment of the debt. Because its credit rating was more favorable than defendant's, plaintiff executed a $14,000.00 note to Branch Banking and Trust Company (BB& T). This note was then endorsed by defendant. The loan proceeds were deposited in plaintiff's account at BB&T and credited to defendant on the original obligation. Plaintiff's records reflect this credit. Although plaintiff remained primarily liable on the note, the understanding between the parties was that defendant would make the payments. To secure this note defendant assigned several notes secured by second mortgages to plaintiff, which in turn assigned them to BB&T. Payments on these second mortgage notes were made to defendant's savings account. Defendant was to apply these funds toward payment on the BB&T note. Defendant "paid down" the note and several renewal notes were issued. Defendant then missed a number of payments and plaintiff made these payments to BB&T. These payments were subsequently charged back to defendant's account with plaintiff. Plaintiff continued to work on projects for defendant and made further ledger entries, designated by the name or address of the property owner, that represented both work done pursuant to written contract and "extras" authorized by defendant. Plaintiff's last entry of 14 May 1971 recorded defendant's $525.00 payment, which was not credited to any specific job. Plaintiff billed defendant regularly, and on 10 September 1971 the indebtedness totaled $18,213.80. After that date defendant received monthly statements for the "balance owing" without objecting or denying his obligation. The parties discussed the matter several times, and in October, 1972, defendant orally promised to pay the entire debt.

Defendant's testimony, which frequently conflicted with that of plaintiff's witnesses, may be summarized as follows: Plaintiff performed subcontracting work for defendant beginning in the late 1950's. From 1968 to 1971 a series of separate contracts were entered for work on houses and other buildings. Defendant's customary procedure was to furnish plans and specifications for the proposed job to plaintiff, who then submitted an estimate. The contract price between defendant and a property owner was based on the estimates submitted by plaintiff and other subcontractors. While plaintiff would on occasion perform additional work at the owner's direction, defendant always insisted that these "extras" be billed directly to the customer. When plaintiff nevertheless included the extras in its statement, defendant would demand that those items be taken off the bill. Several times plaintiff complied temporarily and then resumed its practice of billing defendant for the extras. Defendant endorsed the BB&T note and assigned the second mortgage notes to plaintiff for the purpose of raising $14,000.00 to buy a farm. At that time he owed plaintiff substantially less than the value of the BB&T note and understood the transaction as a sale of the second mortgage notes to plaintiff. After the assignment he did not receive the proceeds from BB&T or credit from plaintiff. Although he claims not to have received the $14,000.00 due him from a "sale" of the second mortgage notes, defendant never filed an action to contest his liability on the BB&T note. Defendant paid down the original and several renewal notes until a $6,550.00 note was issued in November, 1970, and the indebtedness was placed on a monthly basis from that time. Defendant continued to make the monthly payments on this debt, and a balance of approximately $300.00 still remained due at the time of trial. Plaintiff was never authorized to pay BB&T or to charge back any of the payments to defendant. After 10 September 1971 defendant neither discussed the indebtedness with plaintiff nor received any written demands for payment.

Plaintiff contends that the evidence shows a course of dealing which constituted a current or running account between the parties. Moreover, it urges that the payment of 14 May 1971 revived defendant's entire obligation and not, as held by the Court of Appeals, only that portion which plaintiff can prove was incurred within three years prior to that payment or prior to any preceding payments which would have started the statute of limitations running anew. In other words, plaintiff insists that it is not required to prove a succession of payments, each within three years of the previous one and the last within three years prior to the commencement of the action, in order to recover the entire debt.

Defendant argues that the evidence shows that the parties conducted their business under separate contracts for each job rather than on an account. Even if an account is established, defendant urges that the partial payment of 14 May 1971 would not toll the statute of limitations because no evidence would permit the clear inference that by this payment defendant intended to acknowledge and ratify his entire obligation. At the very least defendant argues that the statute was tolled only as to those items which had accrued after 14 May 1968, that the trial court's judgment included recovery for claims which had accrued prior to that date, that plaintiff has not proved successive payments so as to toll the statute on these earlier claims, and that therefore the Court of Appeals correctly reversed and remanded for new trial on these issues.

Plaintiff contended before the Court of Appeals that the evidence showed a "mutual, open and current account" within the meaning of General Statute 1-31 so that the limitations period pursuant to this statute began to run from the time of the "latest item proved in the account on either side." The Court of Appeals correctly held that, because of the absence of reciprocal demands and other characteristics of mutuality, the account alleged by plaintiff does not fall within General Statute 1-31. Plaintiff properly abandoned this contention in its argument before us.

The Court of Appeals also reviewed this area of the law of accounts and summarized the principles which control our decision here. It correctly stated that an ordinary open account results where the parties intend that the individual transactions are to be considered as a connected series rather than as independent of each other a balance is kept by adjustment of debits and credits, and further dealings between the parties are contemplated. Such an account is "running" or "current" where it continues with no time limitations fixed by express or implied agreement. McKinnie Bros. v. Wester, 188 N.C. 514, 125 S.E. 1 (1924); 1 Am.Jur.2d Accounts and Accounting § 4 (1962). An...